WPP Light on Its Feet As Direct Billings Fly

NEW YORK Microsoft’s decision last week to consolidate $400-500 million in global direct-marketing billings at the Young & Rubicam companies and McCann-Erickson WorldGroup was a head-turner in size and scope. But equally significant was Y&R parent WPP Group’s ability to finesse the resulting major conflict with IBM and find a new home for that estimated $120 million direct account.

Sources said WPP managed to shift IBM’s direct duties from Y&R’s Wunderman to OgilvyOne just a few days after Microsoft indicated its desire to hire units of Y&R—chief among them, Wunderman itself. Microsoft called Y&R on Feb. 6, and the IBM shift—which involved honchos such as WPP CEO Martin Sorrell, Y&R worldwide CEO Ann Fudge and IBM svp of marketing Abby Kohnstamm—was completed Feb. 12, said sources.

Microsoft’s massive consolidation, in which work previously handled by thousands of shops was parked at two major networks, suggests a key evolution: that clients which have consolidated ad and media duties are now getting down to the nitty-gritty of doing so with below-the-line services such as customer relationship management, which includes direct.

“The bigger story is there has been a lot of consolidation going on in all kinds of agencies, and I think the IBM one is the next step—that is, to consolidate globally and get all your direct-marketing assets in one place, because so much of it is database-driven,” said Arthur Anderson, principal at Morgan Anderson Consulting in New York. “From a company’s point of view, it’s easier to manage one resource rather than two resources. And if you aren’t giving anything up by having one rather than two resources, it’s probably more efficient.”

In a week, OgilvyOne, run by president Carla Hendra, roughly doubled its IBM business, and the agency and its sister companies, including Ogilvy & Mather and MindShare, have further deepened their global relationship with Big Blue. The same can be said for Microsoft and Interpublic Group’s McCann-Erickson WorldGroup, which already handled the software maker’s estimated $600-800 million global ad account.

Of Microsoft, Anderson said: “They’re trying to be more global in the way they manage their marketing communications. That has not been their history; they generally have been very regional in the way they managed it.”

Microsoft’s decision came after a six-week review in which four agency groups competed, according to sources. The other two finalists could not be determined. Prior to the review, the Redmond, Wash., client spent 10 months assessing its direct-marketing resources, said John Kahan, general manager of Microsoft’s Corporate CRM Group.

The key factors in selecting the winners were their deep resources, “world-class” marketing skills and massive reach, said Kahan. “You want to make sure you’re getting the best,” he said. “This is a huge win for our customers and for Microsoft.”

Sources said Kahan’s familiarity with key players at McCann’s lead direct agency, MRM Partners, and at Y&R gave him further confidence in the selections.

Kahan, who joined Microsoft last March, is a former vp of integrated marketing communications at IBM and worked with Y&R’s John Morris when the latter was worldwide account managing director at Wunderman from 1996-98. Also, MRM’s Joseph McGee and Tony Bishop knew Kahan from management posts they formerly held at OgilvyOne, said sources.

McGee, general manager at MRM in New York, will oversee his network’s efforts, which will involve units such as MRM, Miller Starr and, as needed, FutureBrand. Morris, a Y&R managing partner in New York, will manage Y&R’s piece, which will include Wunderman, Sicola-Martin and KnowledgeBase Marketing, among other units. MRM and Wunderman will be the lead agencies.

Microsoft’s direct-marketing duties will be split along business lines. According to Kahan, the Y&R group will handle servers and tools, home entertainment, MSN, mobility and corporate (excluding legal), while the McCann group takes Information Worker (includes the Office line of products), client, Microsoft Business Solutions and corporate/legal. “This is the initial alignment going forward,” Kahan said. “It could change as we get started.”

McCann WorldGroup’s pitch was led by McGee, MRM CEO Pam Larrick and Michael McLaren, McCann San Francisco’s director of client services, who runs the global Microsoft ad account. Y&R’s pitch was steered by Fudge and Morris. Since Wunderman still worked for IBM, the agency was kept at arm’s length; instead, Y&R used ad executives with experience in direct.

For Fudge, it is her first big win since replacing Mike Dolan last May. In an e-mail to agency staff, she described the news as “historic” and applauded the collaboration. “It is a transformational moment. We are changing the way we do business. We are changing the way we win new business,” Fudge wrote, adding, “In the end, we have come up with a spectacular global assignment and the opportunity to demonstrate the brilliance of Young & Rubicam brands in action.”